Penalties Under the Act

The Employees’ State Insurance Act, 1948 is one of the most important social legislation in India. It aims to guarantee certain benefits to insurable employees working in factories and establishments. There are some penalties under the Act which ensure that employers and managers comply with its provisions. Sections 84 to 86 describe these penalties.

Penalties under the Act

All penal provisions under the ESI Act generally aim to make employers accountable. This is because the failure of employers to carry out their obligations directly affects their employees.

In order to prevent this, the Act allows courts to punish employers with imprisonment as well as fines. In certain cases, even employees can be liable for punishment under the Act.

The following provisions describe various offenses under the Act and relevant punishments for them.

• Section 84: Penalty for false statements
• Section 85: Penalty for non-compliance with provisions
• Section 85(a): Penalty for failure to pay a contribution
• Section 85(b) to (g): Penalty for non-compliance with other requirements
• Section 85-A: Punishment for repeating an offense
• Section 85-B: Power of ESI Corporation to recover contributions
• Section 85-C: Court’s power to direct payment of contribution
• Section 86-A: Offences by companies

Read more about Penalty for Offences under the Act (Section 20) here

Section 84: Penalty for false statements

Section 84 prohibits employees from making false/wrong statements for availing benefits under the Act. Any person who illegally avails benefits not meant for him using false information is punishable. The punishment for this is imprisonment up to 6 months and/or fine up to Rs. 2,000.

Section 85: Penalty for non-compliance with provisions

Section 85 (a) to (g) basically contains compliances which employers and managers have to carry out. Consequently, failure to do so can make them liable for punishment as Section prescribes. Punishment may be in the form of either imprisonment or fine or both.

Section 85(a): Penalty for failure to pay a contribution

All employers under the Act have to periodically pay some money to the ESI Corporation for the benefit of employees. Non-payment of this contribution is a serious offense because it directly affects insurable employees.

Hence, the maximum imprisonment for this offense is 3 years and the minimum is 6 months with Rs. 5,000 as fine.

Furthermore, sometimes employers deduct their employees’ contribution but do not pay it to the Corporation. This offense is even more serious than in general cases. Hence, the minimum imprisonment for such cases is 1 year with a fine of Rs. 10,000.

Section 85(b) to (g): Penalty for non-compliance with other requirements

Apart from payment for their contribution, there are other compliances under Section 85 that employers have to follow. Non-compliance with them can attract maximum imprisonment up to 1 year and/or fine up to Rs. 4,000.

Section 85-A: Punishment for repeating an offense

If an employer convicted under the Act commits the same offense again, he may receive imprisonment up to 2 years. He will also have to pay a fine of Rs. 5,000.

Section 85-B: Power of ESI Corporation to recover contributions

This is one of the penalties under the Act that allows the Corporation to recover money from employers. The Corporation can do so when an employer either pays contribution late or fails to pay it all together. In such cases, the Corporation recovers such amounts of contribution by levying a penalty.

Such penalties can never exceed the amount of contribution payable. Furthermore, the Corporation must hear the employer before levying the penalty.

Let us understand more about Liquidated Damages and Penalty here in detail.

Whenever an employer faces imprisonment under the Act, he may possibly not pay his contribution while in jail.

To prevent this, the court can ask him to pay his contribution for the duration of his sentence. The court can even extend this amount periodically.

Section 86-A: Offences by companies

If a company commits an offense, it can become difficult to fix the blame on the concerned person in default. This section says that in such cases the person responsible for the running of the company should face punishment.

Jurisdiction and Prosecution for Offences

Apart from penalties under the Act, there are some sections that deal with procedural matters as well.

For example, Section 86 says no prosection can begin without the sanction of the Insurance Commissioner. The Director-General of ESI Corporation can accord this authority on other officers also.

Furthermore, Section 86 bars Magistrates under the Criminal Procedure Code from exercising jurisdiction over these offenses. It even says that no court under the Act can take cognizance of matters without written complaints.

Question on State Insurance Act, 1948

Question: Mention the missing word(s) from these following statements.

(1) Most penalties under the Act generally punish the __________.

(2) Section __________ contains some compliances that employers have to carry out.

(3) ESI Corporation can recover contribution from employers by levying a __________ on them.

Answers:          (1) employers          (2) 85          (3) penalty